Digital Music Trends – Episode 38

This week on the show an interview with Scott Geller, CEO of Zooz Mobile. The company has just announced at SXSW a new iPhone app based on five tracks by the Jackson 5.

In the news: We7 strikes and ad deal with Yahoo, Pink Floyd prove that digital is not above board when it comes to respecting a contract, Spotify claims 320,000 paying subscribers but does not give anything away regarding its US launch date, Dimensional is buying back the Orchard, a Spanish judge rules that linking to P2P is not illegal and finally PRS for Music reveals that for the first time ever last year in the UK the rise in revenues generated by online distribution has offset the losses caused by the decline of physical sales. Digital Music Trends – Episode 38 by digitalmusictrends

Well, the ruling in the Emi versus Pink Floyd case made some noise this week. The band, most people will be aware, never released singles as they always wanted people to hear the albums in their entirety. This was put down in writing as a clause of their contract that required the label not to sell tracks individually unless they had the band’s explicit permission. In came the digital revolution and EMI probably thought – there’s no other way to sell tracks on iTunes other than making them available individually so we’re going to run with it. Naturally the band was pretty upset by this and started a legal dispute that may well re-define the way in which old contracts that didn’t take the new digital formats into account are interpreted. This week the court ruled that the band was indeed trying to preserve its artistic integrity by including that clause and that the label should not have started selling the albums digitally without the band’s prior consent. For now the ruling only had EMI pay for the costs incurred by the band, about £40,000, and did not require the label to remove the band’s music from digital stores but that, is suggested, may come at a later stage. I personally can’t believe that EMI thought they’d get away with it simply by pointing out that digital distribution didn’t exist at the time of the signing of the contract and therefore should not abide by the same rules. After all the talk about piracy and about how stealing a song online is just like stealing a handbag in the street or a CD in a music store, how can they go to court and make a case that states that physical products are nothing at all like digital ones? Naturally their hands were tied, Apple’s unwillingness to bundle albums took away the choice from the artist. I personally still don’t get Apple’s stance. I’m sure that if they did let artists choose whether to allow for individual track sales or not the market would then dictate which of the two is right and goes on to achieve more sales overall. If an artist or label only does that because the album’s poor and only the single is any good, like they were doing with CD’s in the 90’s then people will not buy it. If otherwise the album’s good then they will. In any case whether or not EMI decides to pull Pink Floyd’s music from iTunes before a court makes them do it, I’m sure that there are plenty of people out there who would still be willing to go to an alternative online store in order to be able to buy Dark Side of the Moon in its entirety. It’s just a shame that smaller artists who would like the same artistic freedom to sell their album as a complete hole are not afforded the same chance of success if they decide to pull their music from iTunes, which after all does still have a vast majority share in the digital domain.

There was some more Spotify news today straight from the main man Daniel Ek. Digital Venture beat reports that the CEO speaking at South By South West stated that the company now has 7 million users across Europe and 320,000 paying subscribers. This is an encouraging number that has been rising steadily over the past few months. Apparently Spotify is still very committed to the North American market, which could afford them an audience almost twice as large as in Europe. Mr Ek though did not reveal anything in terms of a forthcoming US launch date, stating that dealing with over 5,000 individual publishers in the states turned out to be much more time consuming than the licensing process in Europe. The company is continuously developing its applications to take them one step further but it has no intention of becoming a social network in itself and would rather use existing social network in order for people to exchange reccomendations and play-lists.

My main problem with Spotify premium and We7 Premium at the moment is the lack of multitasking on the iPhone. It may sound like a small problem, but the times in which I want to listen to music on my phone are the times when I’m outside the house, and in those times I want to be able to check my emails, update my twitter, look at a map without having con continuously interrupt my music then spending several seconds getting it back on track. In this form I personally find the app almost unusable unless I’m going for a jog or something that does not allow me to stop and use my smartphone as a smartphone. But then again this problem is limited to iPhone users and moving onto android might be the key to enjoying these subscription services a bit better…

In any case it will be very interesting to see Spotify launch in the US at some point in the future. In the States there are already quite a few subscription services on the market offering similar services and I wonder as to what Spotify can bring to the table that will draw consumers to its service.

Paid content and Music Ally report that we7 has struck a partnership with Yahoo that will see the music streaming service outsource to Yahoo all of its visual adverts. This according to Paid Content will give them a greater clout when dealing with advertising partners. The move comes just less then three weeks after We7 launched its subscription service and iPhone apps, and it shows that We7 is committed to making sure that the free ad-funded streams are monetized just as much as the paid subscription streams. The company does not want to see the free streaming service as a loss leader to drive subscriptions but as a service in its own right that can be a viable business model. The company has been tweaking its advertising model over the past few months as more changes are on the way. For example the company announced that it’s looking at moving from the 10 seconds audio adverts it employed so far to longer, radio-style adverts that could be as long as 20 or 30 seconds. We7 Operates only in the UK and as far as anyone can tell there are no plans to export the service elsewhere yet. The company has always said that they wanted to make sure the service was fully monetized before trying to expand its horizons. CEO Steve Purdham also stated that the partnership with Yahoo could extend beyond visual advertising to encompass content deals as well, so that would be an interesting development certainly worthy of note.

A couple of days ago JDS Capital’s private equity arm Dimensional Associates announced its intention to buy back the share of the Orchard that it didn’t own. The company, which also ownes eMusic, was the sole owner of the Orchard up to 2007 and has now offered to buy the part it no longer owns for 2.05 dollars per share, thus valuing the indie distributor at 12.77 million dollars. The contract includes a 30 day go-shop period where other buyers could sweep in and make a higher offer and it is subject to stockholder’s vote. The contract also includes a provision that would allow stockholders to get a bonus on top of the agreed price if 80% or more of the company was to be sold by Dimensional within 6 months. This clause has led to speculations that the Orchard is only being bought in order to be sold off again, whilst others think that Dimensional will try to merge the Orchard and eMusic into a single entity. In any case the Orchard is a major player in the indie digital distribution arena and these developments are likely to have a significant impact on the market.

Billboard business reports on the latest court ruling coming from Madrid that is set to reinforce Spain’s liberal stance in regards to online piracy. At the center of the dispute this time was the website elrincondejesus.com which contained links to eDonkey. The site had been taken to court by Spain’s powerful collection society SGAE. The judge ruled that since the site was merely an index that facilitated the research within P2P networks it could not be held liable for the files it was linking to and went on to detail that if that was the case then Google would be liable too because it offers access to similar sorts of links through its search engine. This is certainly not great news for those who are lobbying for anti-piracy measures to be adopted in Spain. The Spanish government had already said that it’s not going to target individual users and was thinking of introducing laws targeting sites that made illegal content available – but it looks like that sort of law in the current climate would only apply to sites that were actively hosting the content and not linking to it – and such sites are few and far between. Such a measure therefore would be unlikely to have any impact at all on the piracy phenomenon in Spain.

And finally, UK collection society PRS or Music gave the industry signs of hope as for the first time ever the growth in revenue on the digital front managed to offset the loss of revenue caused by the progressive decline of CD sales. Digital revenues increased by 12.8 million and physical ones declined by 8.7. This naturally only reflects the royalty incomes to songwriters, composers and music publishers and not the labels’ revenues. In this scenario there was no word as to how much streaming services like Spotify and We7 contributed to this surge in digital revenues. We can only hope that next year’s figures will show that on both the collection society’s and the label’s front that digital has finally managed to compensate the loss for physical sales. I believe that can be achieved simply by offering real value and great services to the consumers and not simply by imposing a complicated and hard to implement legislation to tackle and contain the piracy problem.